Date du colloque

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Métadonnées

Auteur

Chemla, Gilles

Type

Communication / Conférence

Nombre de pages du document

25

Résumé en anglais

Although most shareholders hold diversified portfolios, the corporate finance literature postulates that shareholders maximise firm value, while managers sometimes do not. We
argue to the contrary that undiversified managers may care more about firm-level risk and
return than about the value of their shareholders'diversified portfolio. These two objectives
may differ in presence of product-market interactions. We derive a financial and product
market equilibrium in presence of a large, diversified investor and a large number of small
shareholders. Stock prices, asset allocation and product-market competition all depend on
investors'risk-aversion, initial endowment, and industry characteristics. We discuss implications to institutional investor activism, executive compensation contracts, venture capital,
and the decision to go public.